Abakansky ostrog (Абаканский острог), also known as Abakansk (Абаканск), was built at the mouth of the Abakan River in 1675.[3] In the 1780s, the selo of Ust-Abakanskoye (Усть-Абаканское) was established in this area.[3] It was granted town status and given its current name on 30 April 1931.[4]

In 1940, Russian construction workers found ancient ruins during the construction of a highway between Abakan and Askiz. When the site was excavated by Soviet archaeologists in 1941–1945, they realized that they had discovered a building absolutely unique for the area: a large (1500 square meters) Chinese-style, likely Han Dynasty era (206 BC–220 AD) palace. The identity of the high-ranking personage who lived luxuriously in Chinese style, far outside of the borders of the Han Empire, has remained a matter for discussion ever since. Russian archaeologist L.A. Yevtyukhova surmised, based on circumstantial evidence, that the palace may have been the residence of Li Ling, a Chinese general who had been defeated by the Xiongnu in 99 BCE, and defected to them as a result.[16] While this opinion has remained popular, other views have been expressed as well. More recently, for example, it was claimed by A.A. Kovalyov as the residence of Lu Fang (盧芳), a Han throne pretender from the Guangwu era.[17]

In the late 18th and during the 19th century, Lithuanian participants in the 1794, 1830–1831, and 1863 rebellions against Russian rule were exiled to Abakan. A group of camps was established where prisoners were forced to work in the coal mines. After Stalin's death, Lithuanian exiles from the nearby settlements moved in.[18]

The city has a river port, industry enterprises, Katanov State University of Khakasia, and three theatres. Furthermore, it has a commercial center that produces footwear, foodstuffs, and metal products.